GreenSky, Inc. Reports Full Year 2018 Financial Results

Transaction Volume up 34% to $5.03 Billion

Net Income of $128.0 Million; Record Adjusted EBITDA of $171.5 Million

Fiscal 2019 Guidance Reaffirmed

ATLANTA–(BUSINESS WIRE)–lt;a href=”https://twitter.com/search?q=%24GSKY&src=ctag” target=”_blank”gt;$GSKYlt;/agt;–GreenSky, Inc. (“GreenSky” or the “Company”) (NASDAQ: GSKY), a leading
financial technology company Powering Commerce at the Point of SaleSM,
today announced results for the fourth quarter and full year ended
December 31, 2018.

“I am pleased with GreenSky’s solid fiscal 2018 operating results
reported, consistent with guidance, and remain enthused with the
prospects for continued outstanding growth and profitability as we enter
fiscal 2019,” said David Zalik, Chairman and CEO of GreenSky.
“GreenSky’s total addressable market is huge, the demand for the
Company’s proprietary point-of-sale technology continues to grow, our
technology innovation and product road map has never been deeper, and
GreenSky has both the capital and human resources in place to post
another year of record transaction volume and profitability. Moreover,
even after deploying nearly $44 million for share repurchases in the
last two months of 2018, GreenSky’s liquidity remains strong with over
$300 million of unrestricted cash on hand at year end.”

Financial highlights:

Transaction Volume and Transaction Fee Rate: Transaction volume
in the fourth quarter of 2018 increased 23% over the prior year to
$1.3 billion. For the full year, volume increased 34% to $5.03
billion. The average transaction fee rate for the fourth quarter
increased to 7.1% from 6.9% in the third quarter. For the full year,
the average transaction fee rate was 6.9% compared to 7.4% in fiscal
2017.

Revenue: Fourth quarter revenue grew 22% over the prior year to
$109.7 million from $89.8 million. For the year, revenue grew 27% to
$414.7 million from $325.9 million in fiscal 2017.

Net Income and Pro Forma Net Income (1): GAAP
Net Income for the fourth quarter and full year 2018 was $22.8 million
and $128.0 million, respectively. Fourth quarter Pro Forma Net Income
was $21.5 million, or $0.11 per diluted share, which reflected
incremental pro forma tax expense assuming all of our noncontrolling
interests were subject to corporate income taxation. Full year Pro
Forma Net Income was $109.1 million, adjusted for non-recurring
expenses at an assumed effective tax rate of 19.7%.

Adjusted EBITDA and Adjusted EBITDA Margin (1):Fourth quarter Adjusted EBITDA was $33.1 million and 30% of
revenue compared to $48.5 million and 54% of revenue for the fourth
quarter 2017. For the full year, Adjusted EBITDA increased by 8% to
$171.5 million from $159.4 million in 2017. Adjusted EBITDA margin was
41% in 2018 compared to 49% in 2017, such reduction largely
attributable to (i) the aforementioned decrease in the 2018
transaction fee rate, and (ii) the increase in the fair value change
in FCR liability resulting from (a) the combination of a higher mix of
deferred interest loans and an increase in the APR of deferred
interest loans driven largely by growth in elective healthcare
originations, (b) a slight increase in credit losses attributable to
the Company’s seasoning loan portfolio, and (c) an increase in
contracted Bank Partner portfolio yields (associated with an increase
in benchmark rates).

Bank Partner Commitments: As of December 31, 2018, the Company
had aggregate commitments of $11.8 billion from its nine Bank
Partners, $4.8 billion of which were unused.

The average loan servicing portfolio for the years ended December
31, 2018 and 2017 was $6,303 million and $4,501 million,
respectively.

(3)

This index captures projected future net cash flows related to the
respective period’s originations, expressed as a percentage of the
period’s originations. Refer to the Fiscal 2018 Supplemental
Financial Presentation for additional information.

Business update:

New Product Launch: The Company recently announced the launch
of its first revolving credit product to complement the installment
loan products offered to its network of elective healthcare providers.
This product allows providers to offer an alternative for lower
average cost treatments and recurring healthcare procedures, expanding
the market providers can serve. The Company is currently piloting its
revolving credit product with select providers, with a phased
nationwide roll-out planned through the first half of fiscal 2019.

American Express Alliance:

Merchant Referral Program – Over 2,000 home improvement merchant
referrals were received through the American Express merchant
referral program since its launch in early September 2018. The
program was extended to include elective healthcare providers in
February 2019.

The Consumer Direct American Express / GreenSky home improvement
loan pilot program is expected to launch in the first quarter of
2019 in the metro Los Angeles, Chicago, Atlanta, Tampa and Dallas
markets.

Share Repurchases: During the fourth quarter 2018, the Company
repurchased approximately 4.7 million shares of its Class A common
stock at a cost of $43.9 million under the Company’s Board-approved
$150 million share repurchase program. Since year-end through February
28, 2019, the Company repurchased an additional 1.2 million shares at
an incremental cost of $12.7 million.

2019 Financial Guidance:

Based on the Company’s fiscal 2018 performance, its fiscal 2019 planning
and current market conditions, GreenSky reaffirms the fiscal 2019
guidance that it issued on November 6, 2018 and, in that regard, expects
to achieve the following during fiscal 2019:

Transaction Volume to increase 27% to 35% over fiscal 2018 to between
$6.4 and $6.8 billion.

Revenue to grow between 30% and 38% over fiscal 2018 to between $538
and $572 million.

Pro Forma Net Income to grow between 17% and 28% over fiscal 2018 to
between $128 and $140 million using an assumed 22.5% effective tax
rate.

Adjusted EBITDA to grow between 22% and 31% over fiscal 2018 to
between $210 and $225 million.

Average fully diluted shares outstanding in fiscal 2019 of
approximately 185 million.

Conference call and webcast:

As previously announced, the Company’s management will host a conference
call to discuss 2018 results at 8:00 a.m. EST today. A live webcast of
the conference call, together with a slide presentation that includes
supplemental financial information and reconciliations of certain
non-GAAP measures to their most directly comparable GAAP measures, can
be accessed through the Company’s Investor Relations website at http://investors.greensky.com.
A replay of the webcast will be available within 2 hours of the
completion of the call and will be archived at the same location for one
year.

About GreenSky, Inc.

GreenSky, Inc. (NASDAQ: GSKY) is a leading technology company Powering
Commerce at the Point of SaleSM for a growing ecosystem of
merchants, consumers and banks. Our highly scalable, proprietary
technology platform enables almost 15,000 merchants to offer
frictionless promotional payment options to consumers, driving increased
sales volume and accelerated cash flow. Banks leverage GreenSky’s
technology to provide loans to super-prime and prime consumers
nationwide. Since our inception, over 2.2 million consumers have
financed more than $16 billion of commerce using our paperless, real
time “apply and buy” technology. GreenSky is headquartered in Atlanta,
Georgia. For more information, visit https://www.greensky.com.

Forward-Looking Statements

This press release contains forward-looking statements that reflect our
current views with respect to, among other things, our operations and
financial performance; transaction volume, profitability; 2019 financial
guidance; demand for our products; and launch of new products. You
generally can identify these statements by the use of words such as
“outlook,” “potential,” “continue,” “may,” “seek,” “approximately,”
“predict,” “believe,” “expect,” “plan,” “intend,” “estimate” or
“anticipate” and similar expressions or the negative versions of these
words or comparable words, as well as future or conditional verbs such
as “will,” “should,” “would,” “likely” and “could.” These statements are
subject to certain risks and uncertainties that could cause actual
results to differ materially from those included in the forward-looking
statements. These risks and uncertainties include those risks described
in our filings with the Securities and Exchange Commission and include,
but are not limited to, risks related to our ability to retain existing,
and attract new, merchants and Bank Partners; our future financial
performance, including trends in revenue, cost of revenue, gross profit
or gross margin, operating expenses, and free cash flow; changes in
market interest rates; increases in loan delinquencies; our ability to
operate successfully in a highly regulated industry; the effect of
management changes; cyberattacks and security vulnerabilities in our
products and services; and our ability to compete successfully in highly
competitive markets. The forward-looking statements speak only as of the
date on which they are made, and, except to the extent required by
federal securities laws, we disclaim any obligation to update any
forward-looking statement to reflect events or circumstances after the
date on which the statement is made or to reflect the occurrence of
unanticipated events. In light of these risks and uncertainties, there
is no assurance that the events or results suggested by the
forward-looking statements will in fact occur, and you should not place
undue reliance on these forward-looking statements.

Non-GAAP Financial Measures

This press release presents information about the Company’s Adjusted
EBITDA, Pro Forma Net Income and Pro Forma Diluted EPS, which are
non-GAAP financial measures provided as supplements to the results
provided in accordance with accounting principles generally accepted in
the United States of America (“GAAP”). We believe that Adjusted EBITDA
is one of the key financial indicators of our business performance over
the long term and provides useful information regarding whether cash
provided by operating activities is sufficient to maintain and grow our
business. We believe that this methodology for determining Adjusted
EBITDA can provide useful supplemental information to help investors
better understand the economics of our platform. We believe that Pro
Forma Net Income and Pro Forma Diluted EPS are useful measures because
they make our results more directly comparable to public companies that
have the vast majority of their earnings subject to corporate income
taxation. We are presenting these non-GAAP measures to assist investors
in evaluating our financial performance and because we believe that
these measures provide an additional tool for investors to use in
comparing our core financial performance over multiple periods with
other companies in our industry.

These non-GAAP measures are presented for supplemental informational
purposes only. These non-GAAP measures have limitations as analytical
tools and should not be considered in isolation from, or as substitutes
for, the analysis of other GAAP financial measures, such as net income
and diluted earnings per share. The non-GAAP measures GreenSky uses may
differ from the non-GAAP measures used by other companies. A
reconciliation of each of the foregoing non-GAAP financial measures to
the most directly comparable GAAP financial measure is provided below
for each of the fiscal periods indicated.

Basic and diluted earnings per share of Class A common stock are
applicable only for the period from May 24, 2018 through December
31, 2018, which is the period following the initial public
offering and related Reorganization Transactions.

GreenSky, Inc.

Consolidated Statements of Cash Flows

(Dollars in thousands)

Year Ended December 31,

2018

2017

Cash flows from operating activities

Net income

$

127,980

$

138,668

Adjustments to reconcile net income to net cash provided by
operating activities

Includes both corporate and non-corporate tax expense. Non-corporate
tax expense is included within general and administrative expenses
in our Consolidated Statements of Operations. Prior to the IPO and
Reorganization Transactions, we did not have any corporate income
tax expense.

(2)

Includes equity-based compensation to employees and directors, as
well as equity-based payments to non-employees.

(3)

Includes the non-cash impact of the initial recognition of servicing
liabilities and subsequent fair value changes in such servicing
liabilities during the periods presented.

(4)

In 2018, non-recurring transaction expenses include certain costs
associated with the Reorganization Transactions and our IPO, which
were not deferrable against the proceeds of the IPO. Further,
certain costs related to our March 2018 term loan upsizing were
expensed as incurred, rather than deferred against the balance of
the term loan and, therefore, are being added back to net income
given the non-recurring nature of these expenses. In 2017,
non-recurring transaction expenses include one-time fees paid to an
affiliate of one of the members of the board of managers in
conjunction with the August 2017 term loan transaction.

Reconciliation of Pro Forma Net Income

(Dollars in thousands)

Three Months EndedDecember 31,

Year EndedDecember 31,

2018

2017

2018

2017

Net income

$

22,848

$

39,902

$

127,980

$

138,668

Non-recurring transaction expenses(1)

—

—

2,393

2,612

Incremental pro forma tax expense(2)

(1,395

)

(15,326

)

(21,248

)

(54,266

)

Pro Forma Net Income

$

21,453

$

24,576

$

109,125

$

87,014

________________________________

(1)

In 2018, non-recurring transaction expenses include certain costs
associated with the Reorganization Transactions and our IPO, which
were not deferrable against the proceeds of the IPO. Further,
certain costs related to our March 2018 term loan upsizing were
expensed as incurred, rather than deferred against the balance of
the term loan and, therefore, are being added back to net income
given the non-recurring nature of these expenses. In 2017,
non-recurring transaction expenses include one-time fees paid to an
affiliate of one of the members of the board of managers in
conjunction with the August 2017 term loan transaction.

(2)

Represents the incremental tax effect on net income, adjusted for
non-recurring transaction expenses, assuming that all consolidated
net income was subject to corporate taxation for the periods
presented. For the years ended December 31, 2018 and 2017, we
assumed effective tax rates of 19.7% and 38.4%, respectively. The
incremental pro forma tax expense for the three months ended
December 31, 2018 and 2017 reflects updates to our effective tax
rate during the quarter, and the effective tax rate for the three
months ended December 31, 2017 assumes an effective tax rate of
38.4% for each quarter of 2017.

Reconciliation of Diluted EPS to Pro Forma Diluted EPS

Three Months EndedDecember 31, 2018

Diluted EPS

$

0.11

Non-recurring transaction expenses

—

Pro Forma Diluted EPS(1)

$

0.11

Weighted average shares outstanding – diluted

188,898,658

___________________________________

(1)

Pro Forma Diluted EPS represents Pro Forma Net Income divided by
GAAP weighted average diluted shares outstanding. There were no
non-recurring transaction expenses during the quarter.